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Polish Inflation Lowers to 2%

Poland’s consumer index slowed from 2.2% year on year in February to 2%, the statistics office GUS announced on 31st March.

The current rate of inflation is still 0.5% behind the 2.5% target of the Polish central bank. With interest rates sitting at 1.5%, the March figure of 2% keeps real rates in negative territory.

The slowing tempo of inflation is in line with rate setters’ opinion that the swift rise that kicked off in December is merely a temporary phenomenon. The Monetary Policy Committee insists that the surge is largely the result of external factors such as oil prices and the low base from 2016 and will therefore quickly level out.

The MPC continues to suggest it does not expect to institute a hike in rates before 2018. The council also appears convinced that economic growth will return to form by the second quarter, as investment picks up.

Poland’s GDP expanded 2.8% in 2016 on the back of the weakest investment since 2010, largely a result from political uncertainties in the country. The result was below the government’s outlook of 3%-3.2%, which is a reduction on earlier predictions for an economic expansion of 3.8%.

Good performance from real economy sectors in early 2017 revived hopes for faster growth in 2017.